Why Short Term Loan Rates Are So Important

by | Aug 13, 2020 | Loan

At one point or another, just about everyone will need to secure a short term loan. The purposes for loans range from the need to make auto repairs to buying new homes. Whatever the reason, there is one factor that always catches the eye of the applicant. That is the interest associated with the loan. Here are some points to keep in mind about short term loan rates.

How Credit Scores Affect the Rates

Lenders want to do business with people who need loans, but they do have to think about the amount of risk involved with every loan approval. Credit scores provide a valuable clue in terms of how much risk the applicant represents to the short term loan lender. Simply put, people with higher credit scores will be able to command loan rates that are lower. This is because their excellent scores indicate they are highly likely to repay the loans according to terms. People with lower scores may still be approved, but they can expect to pay higher rates.

The Relationship Between Income and Debt

Another factor that the lender will consider closely is the ratio between the amount of income generated each month and the debt that the applicant is carrying. If it is taking over a certain percentage of that income to cover existing expenses, will there be enough left over to cover the monthly loan payment? Lenders who think that approving the loan would place too much of a financial burden on the borrower are likely to reject the application. When it appears that the borrower can manage the loan and still pay everything else on time, the loan is likely to be approved and a reasonable rate applied to the loan balance.

For people who need short term loans for just about any purpose, stop by Short Term Loans, LLC, and talk with a loan officer. Learn more about the types of loans offered and get some advice about how to apply. Once the application is completed, it will be given full consideration. In the best scenario, the loan can be approved quickly.

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